Comments on: Public-Private Investment Program for Dummies: How does the new Treasury Plan Impact Housing and the Market? Poorly Planned Investment Program (PPIP).

By: ME2000

ME2000 — Fri, 27 Mar 2009 18:11:33 +0000

Thanks Dr. HB, it is a very precise article.
However, I want to point out that we are in this situation and the taxpayer has already been lost. Even if you let all bank bankrupt, the lose in income tax and un-employment services are also huge. My key point is: LOSE ALREADY. Best aim is to have demage control.
PPIP most definitely will cause taxpayer money. But with some control on the numbers, it may become LOSE LESS.
1. Since the government match contribution is already non-recourse, hence FDIC portion of leverage MUST BE RECOURSE.
2. Limit FDIC portion to a maximum of 40% book value.
3. Limit TRAP match portion to a maximum of 10% book value.
Still there are chances that the “investor” may drain some taxpayer’s money; but it is vastly limited. And it is kind of balance out the upside and downside.
With this setup, even the actual value of the toxic is 30 cents for a dollar. Taxpayer may lost 10 cents a dollar. If the bank willing to re-invest in that scale, that 10 cents is a good comprimise for the tax income and un-employment services.

By: PPIP EXPLAINED

PPIP EXPLAINED — Fri, 27 Mar 2009 14:51:38 +0000

PPIP explained with poo poo:

http://www.youtube.com/watch?v=OWLUiT_0ZFw

By: blutown

blutown — Fri, 27 Mar 2009 02:49:08 +0000

From Nouriel Roubini’ RGE Monitor Newsletter on PPIP:
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“Clearly the unfreeze of credit markets would be the first sign of success but we might not see this happening before some time. Some of the banks that choose to sell assets and take a writedown might be in need of additional capital before they can resume lending. Also, for those institutions that are beyond the stage of rescue and effectively insolvent, the plan will likely not be as effective in stimulating lending or participation in the first place.
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The increase in the supply of credit that will come from institutions that are solvent will be important, but will demand be there to do its part? If the real side of the economy continues to deteriorate, it is likely that credit demand might be subdued. Moreover, a further continued deterioration on the real side of the economy would imply new defaults on credit cards, consumer loans, auto loans and mortgages that would result in new toxic assets on the balance sheets of financial institutions recreating an environment where banks would maintain stringent lending standards. Therefore, the success of the plan is a necessary but not sufficient condition to get the economy back on a recovery path. The success of the fiscal stimulus package in sustaining aggregate demand and minimizing job losses and the success in restarting demand in the housing sector will be instrumental to put a stop to the negative feedback loop between the real and the financial side of the economy.
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Moreover, if the negative feedback loop persists, need for further funding will arise. While it will be very challenging to obtain Congress approval for additional TARP money, we should point out that the government has set aside an additional $750bn in the FY2010 budget in aid for the financial sector.”
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In other words PPIP is like Life Support, it might stablize the patient but if the patient is terminal, it will be of no use (unless you like zombies). If the patient already has a good prognosis, why does it need PPIP in the first place??? My favorite part is where he rightly points out that the legacy crapola will grow dramatically. There is no hope of off-loading this yet to be realized this sewage on taxpayers because the printing presses can’t keep up. Then what? Our “human exemption” is keeping us in a hyper-delusional state. Be brave Comrades!

By: kihei

kihei — Thu, 26 Mar 2009 07:52:16 +0000

Hey Dr did you see this? HOPE program only prevented 1 foreclosure. What a joke.

http://money.cnn.com/2009/03/25/real_estate/new_hope_plan/index.htm?postversion=2009032512

By: fatherpain

fatherpain — Thu, 26 Mar 2009 04:11:09 +0000

I wish someone in the media had the guts to ask President Obama what does he say to the people that have been saving and waiting for housing to become affordable only to have the government prop up home prices and keep the bubble inflated. What is your take on the housing bubble good Doctor in light of the governments continued intervention? Will we see it deflate or will the bubble be prolonged?